Britain on course to lose vote on EU banking rules
BRITAIN is on course to be outvoted for the first time ever on a major piece of EU financial regulation, after EU officials said they had a majority in favour of proposals that Osborne said would make him look “like an idiot”.
Following 16 hours of negotiations on a set of new EU banking rules that broke up at 2am on Thursday, Britain was still far from securing the concessions it wants.
If it cannot get enough support between now and the next meeting of EU finance ministers in two weeks, the UK faces the prospect of losing control over its bank regulations despite being home to Europe’s biggest financial centre.
Denmark, which holds the EU’s rotating presidency, said: “There is a supporting qualified majority but we would like to widen this support even further. I hope that we can reach an agreement.”
EU commissioner Michel Barnier echoed the sentiments, but hours earlier he had threatened chancellor George Osborne with being outvoted if Britain would not give in. He said he “hoped” the vote would be unanimous, but cited “a very large consensus” in favour of the current version of the banking rules, which aim to make the EU’s lenders safer.
The key issues at stake are Britain’s ability to implement its new macro-prudential regulatory regime, which it says is not possible under the current draft, and a series of loopholes inserted into the text by France and Germany that Osborne wants taken out. The rules are based on the international Basel III regulations, but the UK says they are watered down.
Britain has won some concessions, however, and a Treasury source said it is too soon to judge the final outcome. The rules will now allow London to tack on an additional three per cent in capital requirements to the EU minimum and use tighter criteria defining what capital counts – although not as tight as the UK wants.
But many in the City have raised doubts over the effectiveness of the Basel regime. “Basel III is not a final panacea of banking regulations,” said BDO partner Charles Ilako. Others argue the regulations will produce huge distortions with unknown consequences.